Apparently I didn’t miss much on Friday, opting to soak in the last remaining days of summer in Chicago with all of the trappings that go along with it. It’s highly refreshing to totally disconnect and focus on the things that makes one happy on the inside.
Preparing for yet another week, IMM data says JPY longs are down and that has traders overseas tonight abuzz that USDJPY may not breach the 85.00 level. There’s also rumors abounding about PM Kan and the BOJ meeting to discuss the recent strength of the JPY, which has caused a couple of intriguing headlines to come out of that country, most notably last week saying that they had managed to post a record loss in their JPY current account. That’s something to watch for over the coming week, although I don’t think it will be a big deal in the grand scheme of things – there’s bigger fish to fry.
Japan Bond Market Morning Session
2Y 12.2, +1.2, 5Y 26.3 +0.3, 7Y 49.7 unch, 10Y 94.1 +0.6, 20Y 157.2 +1.2, 30Y 160.6 +1.6
The majority of the selling is occurring in the 30Y JGB as well as moderate selling in the 40Y portion of the curve which is surprising seeing that the Japan equity market is slightly weaker.
2s5 14.10 -0.90, 2s10 81.90 -0.60, 2s30 148.40 +0.40, 5s10 67.80 +0.30, 5s30 134.30 +1.30, 10s30 66.5 +1
USDJPY has been tipped in a range of 8530-8565 for most of the morning session. Yen is also stronger against the GBP, currently 132.90-133.10
US Overnight Session
Buyers active tonight sending yields down fractionally lower. The majority of the buying is on the long end with the 30Y down 1bps to 365.3
2Y 48.7 -0.8, 5Y 144.6 -0.6, 7Y 205 -0.4, 10Y 260.7 -0.9, 30Y 365.3 -1
2s5 95.85 +0.15, 2s10 212 -0.1, 2s30 316.55 -0.25, 5s10 116.15 -0.25, 5s30 220.61 -0.49, 10s30 104.46 -0.24
Swap Spreads: 2Y 18.5 +0.75, 5Y 22 -0.25, 7Y 12 -0.5, 10Y 2 unch, 30Y -35.50 +0.1
2s5s10 19.53 -1.17, 2s5s30 123.94 -1.46, 2s10s30 -108.1 -0.69
USD Libor butterflies all wider across the board, notable standouts are 2s5s10 -1.60 +2.60 and 2s1s030 -126.6 +2.70
Historical Volatility Update
Note: Includes Friday’s (8/20) indicative closing prices